When Can a Commercial Dispute Become a Criminal Case in China?

Which offenses come up most often?

• Contract fraud (合同诈骗罪, Article 224 of the Criminal Law): obtaining the other party's money or property while signing or performing a contract, by deception and for the purpose of illegally taking possession of it. Typical allegations include signing in the name of a fictitious entity or by impersonating another person, using forged or invalid documents as security, taking goods or advance payments and then disappearing, or performing a small part of a contract to induce a larger payment.
• Fraud (诈骗罪) in general, where there is no contract as such.
• Occupational embezzlement and misappropriation of funds (职务侵占罪, 挪用资金罪): an employee or manager taking or diverting company money. These often arise in disputes between shareholders or joint venture partners.
• Illegal fundraising: raising money from the public without approval. See Arrested at Work: Illegal Fundraising Risk for Sales Staff in China.
• Refusing to comply with a court judgment (拒不执行判决、裁定罪, Article 313): a party able to comply with a court judgment who refuses, in serious circumstances, can be prosecuted. This turns an unpaid civil judgment into a criminal matter.

Where is the line between breach of contract and fraud?

The key question in contract fraud is the purpose of illegal possession (非法占有目的): whether the person meant to take the property as their own. Courts and prosecutors look at objective facts such as:

• whether the party had the ability and genuine plan to perform when signing;
• whether they used false identities, forged documents or false claims about their capacity;
• what they did with the money: put it into the business, or moved it out, spent it on personal items, or hid it;
• whether they tried to perform, explained difficulties and negotiated, or disappeared;
• whether failure resulted from ordinary commercial risk, such as market changes.

A party who signed in good faith, tried to perform and failed for business reasons has, in principle, a civil dispute, not a crime. But the line is fact-specific and contested in practice.

Are the police allowed to take sides in a commercial dispute?

They are not supposed to. The rules on economic crime cases require the police to strictly distinguish economic crime from economic disputes (Article 2 of the SPP and MPS Provisions on the Handling of Economic Crime Cases by Public Security Organs). Where there is evidence that the police may have unlawfully intervened in an economic dispute, the procuratorate must require them to explain in writing why the case was opened, and can order the case withdrawn if the reasons do not stand up (Article 28).

New rules from the Supreme People's Court also limit the use of a criminal case to block civil claims: since September 22, 2026, a related civil case generally proceeds in parallel with the criminal case unless it truly depends on the criminal outcome. See When a Commercial Dispute Meets a Criminal Case: Six Changes in China's New Supreme People's Court Rules.

What happens to the contract?

A contract does not become void just because a crime was involved. Whether it is valid, and whether it binds the company, is decided under civil law. See Is a Contract Void in China If a Crime Was Involved?

What should a foreign business do?

If you are the party making the complaint, consider whether the facts really show criminal intent, or whether a civil claim or arbitration is the better path. A criminal complaint can put pressure on the other side, but it gives you less control: the authorities decide whether to open and pursue the case, and recovery through the criminal process can be slow and partial.

If a complaint is made against you or your staff:

• take it seriously from the start: early legal advice can shape what the police see;
• gather the documents that show good faith: contracts, correspondence, performance records, and evidence of where the money went;
• consider whether foreign staff are at risk of being questioned or barred from leaving China (see Can I leave China while under investigation?);
• if you believe the case is in substance an economic dispute, your lawyer can raise this with the police and ask the procuratorate to review whether the case was properly opened.

When drafting contracts, think about how disputes will be resolved. Clear performance obligations, documented payments and an arbitration clause make it easier to show that any disagreement is commercial.

Legal basis (October 2026)

• Criminal Law of the People's Republic of China, Articles 176, 192, 224, 266, 271, 272 and 313
• Provisions of the Supreme People's Procuratorate and the Ministry of Public Security on the Handling of Economic Crime Cases by Public Security Organs, Articles 2 and 28
• Provisions of the Supreme People's Court on Several Issues Concerning the Trial of Civil Disputes Involving Criminal Offenses (Fa Shi [2026] No. 19)